The Tsunami in the Indian Ocean -- and a man-made tsunami caused by the expiration of a treaty, the Multi-Fibre Agreement. Part Two.

"Waves of Devastation"
January 14, 2005

Huck Gutman

        Pakistan is vulnerable as well, with textile products comprising two-thirds of its $12 billion in exports. Textiles account for 1.4 million jobs and over 11 per cent of its GDP. There is disagreement about whether Pakistan, which produces cotton and has ports, will be able to hold its own – or whether it will like Bangladesh see its textile industry destroyed by more efficient production facilities in India and especially China. This past year, Pakistan imported 1.9 million bales of cotton, making Pakistan the third largest cotton importer in the world. That cotton is used in textile production – but it could very easily go elsewhere, like China. Indeed, the South China Morning Post recently reported that “Bangladesh, Cambodia and Pakistan are the most vulnerable to the end of textile quotas, as garments account for more than 70 per cent of their exports, according to the IMF and the WTO.”

        In Sri Lanka, textiles are responsible for 4,50,000 jobs in a nation of 19 million people, over 15 per cent of all economic activity, and 65 per cent of all industrial exports. According to a recent report in the Washington Post, 93 per cent of those textile exports went to the USA and EU countries where the MFA guaranteed access. “Fifty to 60 thousand people might lose their jobs. Fifty to 100 factories will be closed,” according to Sri Lanka’s minister of trade, Jeyaraj Fernandopulle.

        Mongolia is greatly vulnerable to textile job loss. One hundred foreign-owned textile companies operate in Mongolia, 48 of them from China. Textiles provide 12 per cent of its exports, and 30 per cent of its labour force. In Cambodia and Laos, textiles provide 90 per cent of foreign exports.

        And it is not just Asia. Egypt and El Salvador, Tunisia and Mexico, Botswana and Guam are all at risk. Individual workers will be laid off, families will sink beneath subsistence, social programmes will be ended because foreign exchange is no longer available.

        On the other hand, China will reap the advantages of cheap labour, excellent infrastructure, efficient transportation, vast pools of capital investment – and economies of scale which stagger the imagination. Consider the city of Datang, the apparent sock capital of the world. Last year, its 2,500 factories produced five billion pairs of socks – about a third of socks produced in the whole world! Although a majority of the socks were sold in the domestic market, even before the expiration of the MFA, Chinese exports to the USA had increased from 11 million to 260 million in the last three years.

        China is expected to increase its production dramatically, and to garner a larger share of the world market for clothing: 50 percent of the US market, for instance. There will be more jobs for Chinese workers, but the wealth will be unevenly distributed, flowing far more into the pockets of those who own the factories than those who work there.

        To offset the concerns of many nations about its unfair advantages – with great access to capital both internally and from abroad, with government subsidies which go unreported, with an artificially low yuan pegged to a sinking dollar – China has said it will place an export tax on textile products. But though this will raise the cost of Chinese goods marginally, it will also bring new revenue into the Chinese Treasury, enabling the government to spend additional money upgrading infrastructure, providing loans, and extending subsidies.

        Waves pound behind the waves that are forthcoming. One can foresee devastation in Bangladesh, for instance: a million workers losing their jobs in one of the world’s most fragile economies. Fifteen million more jobs at risk. And no more foreign exchange to help develop alternate infrastructure, or pay for rice when the next typhoon destroys part of the current crop.

        The loss of foreign exchange as cotton exports plummet in nations like Bangladesh, will set in motion draconian social forces. The more negative a country’s current accounts balance, the less money it has available for use in the trade between nations, the less it has for internal investment, the more it is helpless before IMF mandates to cut its national budget. Without supplies of foreign exchange, all development will atrophy. Without supplies of foreign exchange, the IMF will demand ever greater reductions in social programmes as the requirement for extending existing loans or guaranteeing new ones. Without such exchange, the desperately poor nations of the world will become outcasts, orphans.

        But one can also foresee devastation in the nations that gain jobs. For the world’s labour market, and especially in textiles, has been a race to the bottom. As soon as workers ask for more money, or a burgeoning economy develops, buyers look for cheaper sources of labour. It is the MNCs which win, not labouring men and women.

        Ann Chen, a partner in the business consulting firm Bain & Co., said recently, “The big winners in the WTO’s plans to eliminate textile quotas will be global retailers, such as Wal-Mart, who will be given even more power to squeeze textile suppliers for lower price points on goods. Global retailers will be free to offer almost any volume of commitment to a Chinese factory, which could further stifle global competition in textile manufacturing.

        Among the losers will be consumers as the variety of textile goods will decrease.” Even bigger losers will be textile workers with jobs whose wages will likewise be squeezed by lower price points: it is estimated that US apparel prices will drop as much as 20 per cent in the wake of the end of MFA quotas. And then there are the possible 30 million workers who will lose their jobs.

        In a world guided by rationality, it ought to be realised that the intent of the MFA, to give every nation a chance to develop a textile industry and provide textile jobs to its citizens, was both visionary and just. And this should have guaranteed protection of the quotas that rein in the MNCs so that human values, and not just profits, determine how and where textile products are manufactured.

        But we live in a world where greed is rampant – not among all of us, but among the powerful. And the powerful will do what they want, even if a devastating but silent tsunami is the result. The wealthy and powerful, after all, can take vacations in lovely places and live in gated compounds: they can block out every vestige of human misery. For the workers of the world, and the underdeveloped nations, the expiration of the MFA quotas will quite likely be another story.


Huck Gutman was Fulbright Visiting Professor of English at Calcutta University. He teaches at the University of Vermont.